SEC-CESR Set Out the Shape of Future Collaboration

FOR IMMEDIATE RELEASE2004-75

Washington, D.C., June 4, 2004 -- The United States Securities and Exchange Commission (SEC) and the Committee of European Securities Regulators (CESR) announced today that they intend to increase their co-operation and collaboration. In a press conference held in Amsterdam, SEC Commissioner Roel C. Campos and CESR Chairman Arthur Docters van Leeuwen presented the terms of reference establishing the structure of this enhanced dialogue, and set out the subjects that will dominate the agenda during 2004 and 2005.

The goal of increased SEC-CESR co-operation and collaboration follows a visit by CESR's Chairman Arthur Docters van Leeuwen to Washington at the end of 2003, and was proposed by SEC Chairman William H. Donaldson in January 2004 during a visit to Brussels.

The dialogue has two primary objectives, namely to

identify emerging risks in the US and the EU securities markets for the purpose of improving our ability to address potential regulatory problems at an early stage; and

engage in early discussion of potential regulatory projects in the interest of facilitating converged, or at least compatible, ways of addressing common issues.

The SEC and CESR will also share their experiences regarding enforcement matters in transatlantic and European cross-border cases.

As set out in the terms of reference, the dialogue will take place several times per year at both the Chairman's level and at a working level.

In setting out the areas of dialogue that will define the agenda for the second half of 2004 and for 2005, the following issues for discussion were identified:

market structure issues (the SEC's review of the US national market structure and the CESR work on the implementation of the new Investment Services Directive);

future mutual fund regulation, including with respect to stale price arbitrage, late trading, and corporate governance;

development of an effective infrastructure to support the use of International Financial Reporting Standards, in particular with respect to consistent application, interpretation and enforcement of these standards with the final objective of avoiding reconciliation with local GAAPs; and

credit rating agencies.

Furthermore, given the fast-moving nature of financial services markets, Commissioner Campos and Chairman Docters van Leeuwen were keen to stress that this is an indicative list of issues on which the dialogue will focus, and that it may be revised if new regulatory issues affecting the EU and US markets emerge in the course of the year.

Finally, the enhanced SEC-CESR relationship will complement other existing bilateral discussions that the SEC and CESR members already conduct with regulators from around the world. Similarly, it will supplement, rather than replace, the EU/US Financial Markets Dialogue, led by the European Commission and the US Treasury Department. It is also worth noting that the scope of the SEC-CESR enhanced relationship will not include the setting of standards. That task remains the purview of the International Organization of Securities Commissions, in which both the SEC and CESR members continue to participate actively.

Commissioner Campos noted that, "In today's markets, it is critical that securities regulators around the world work with each other in order to address the risks facing our markets. By discussing emerging problems at an early stage and working to facilitate convergence of regulatory approaches, the SEC and CESR will be able to protect investors while lowering unnecessary administrative barriers to cross-border business. The enhanced relationship between the SEC and CESR builds upon the strong ties that already exist between the US and Europe, and will help bring the global community of securities regulators even closer together."

CESR's Chairman Docters van Leeuwen noted that, "Ensuring the integrity of the markets is a common objective which both binds and drives the work of the SEC and CESR on a day to day basis, encouraging us to forge this deeper dialogue. The final results of this transatlantic dialogue and indeed, the outcome of a deepening and widening of both US and EU markets, cannot be predetermined today, nor I hasten to add should it be. Rather, our dialogue will need to be responsive to the needs and developments of the markets we share. The question will therefore not be whether we laboured hard enough, nor even, if the result was worth the effort, but if the results create quality in a globally integrated market."

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Terms of reference for the cooperation and collaboration regarding market risks and regulatory projects the Committee of European Securities Regulators

The purpose of this document is to set forth the terms of reference for the cooperation and collaboration between the Committee of European Securities Regulators (CESR) and the US Securities and Exchange Commission (SEC).

The enhanced relationship between the SEC and the members of CESR has two objectives. The first objective is improved oversight of US and EU capital markets through increased communication regarding regulatory risks to enable regulators to anticipate regulatory problems more effectively. The second objective is to promote through timely discussion regulatory convergence with regard to future securities regulation.1

The initial terms of reference include two primary areas of work. This work would be done through regular meetings among senior staff and chairs of CESR members and the SEC.

1. Identification and discussion of regulatory risks present in US and EU securities markets.

The cooperation and collaboration will provide an opportunity to identify risks developing in US and EU securities markets.

CESR members and the SEC will share their views regarding these emerging regulatory risks relating to multinational market participants active in the US and EU financial markets (including broker-dealer groups, issuers, exchanges, fund complexes, etc.). Such cooperation should serve as an early warning system about potential problems.

This enhanced cooperation may also allow CESR members and the SEC to develop a strategy for addressing the risks in a coherent fashion. In particular, as necessary, CESR members and the SEC will put in place appropriate information sharing links in case of market events that may affect the normal functioning of US and EU markets (crisis management).

CESR members and the SEC will share experiences regarding enforcement matters involving multinational market participants active both in the US and EU financial markets. Where necessary, CESR members and the SEC will coordinate their efforts to increase the ability of uncooperative and under-regulated jurisdictions to exchange information.

2. Early discussion of potential regulatory projects in the interest of facilitating regulatory convergence.

The CESR — SEC cooperation will afford the opportunity to discuss at an early stage issues of regulatory concern in the United States and in Europe. The purpose of these discussions is to facilitate converged, or at least compatible, approaches to regulatory issues.

The SEC and CESR will provide an annual indicative list of regulatory areas to be discussed in the course of the coming year.

3. Possible further areas of work

CESR members and the SEC may undertake additional areas of work in the future for the purpose of supplementing the early warning system regarding regulatory risks to be advanced through this dialogue. This may include a more articulated regulatory information-sharing and an expanded memorandum of understanding regarding cooperation on enforcement matters. CESR members and the SEC will consider these and other possible areas of work once meetings addressing the above issues are underway.

4. EU/US Financial Services Dialogue

CESR and the SEC will inform the institutions involved in the EU/US Financial Markets Dialogue of the substance of the discussions undertaken as part of their cooperation and collaboration, unless bound by confidentiality requirements.

1 For the purpose of these terms of reference, "regulatory" refers to the competences of the SEC and of the European securities regulators members of CESR.